Analysis: Is Kingfisher’s new strategy enough to rebuild it?

Home and DIY giant Kingfisher, which owns B&Q and Screwfix in the UK, as well as Castorama and Brico Dépôt in France, revealed its ‘Powered by Kingfisher’ strategy in its results this week, with key priorities being simplification, ecommerce and its own-brand products. 

The strategy marks a move away from former chief executive Véronique Laury’s ‘One Kingfisher’ plan – a five-year programme that aimed to unify operations and product ranges across the group. Laury pledged that One Kingfisher, which was launched in 2015, would deliver a £500m annual profit uplift upon completion. But that ambition failed to materialise and the strategy ultimately resulted in mounting losses, culminating in Kingfisher’s relegation from the FTSE 100 in March.

Garnier summarises that One Kingfisher “tried to do too much, became overly complex, which meant we lacked the agility to meet the customer needs”.

Instead, Garnier aims to break down the company into its “distinctive retail banners with diverse customer needs” with more devolved local operations. The group itself will provide “distinct sources of power including sourcing and buying, own-brand product development, shared services and a centre of excellence”.

There are eight tenets to Garnier’s strategy:

• Focus and fix in 2020, including managing the impact of Covid-19 on the business
• Move to a balanced, simpler local-group operating model with an agile culture
• Grow ecommerce sales
• Build a mobile-first, service-oriented customer experience
• Differentiate and grow through own exclusive brands
• Test new store concepts and adapt the store footprint
• Source and buy better, reduce costs and inventory
• Lead the industry in responsible business practices.

Retail analyst Tony Shiret believes the new strategy was necessary, as One Kingfisher was struggling to make homogenous initiatives work across different countries.

“[Laury’s] strategy was very much based on the French view of centralisation, which was popular with French hypermarkets and their global expansion in the 1980s and 1990s – meaning it was a strategy from a different age and was very inflexible,” he says. 

“Clearly, Kingfisher wants things to change and for the business to fulfil its potential, but it’s also evident that the centralisation initiative hasn’t delivered.” 

2020 overhaul

Garnier does not deny that some good came out of Laury’s plan, namely “greater buying efficiencies, improved price positioning and own exclusive brands”, all of which he aims to build on, but he also asserts that change was needed.

“My immediate priorities [when I joined Kingfisher] were to produce a new strategic plan, build a new executive team and take some early decisions to focus and fix the business,” he says.

“This included balancing group versus local responsibilities, implementing our new trading approach, enabling ecommerce from stores, pausing non-critical initiatives and accelerating cost reduction.”

“While Covid-19 shifted our immediate priorities, it was essential that we put in place a new strategic plan to return Kingfisher to growth over the long term”

Thierry Garnier, Kingfisher

The impacts of Garnier’s decisions have started to show in Kingfisher’s financial results, with like-for-like sales improvement from -2.4% to 1.4% in the fourth quarter of the retailer’s most recent financial year, improving to 7.6% by February. 

While there is no doubt the coronavirus pandemic has had an impact on the group as it initially closed all stores, it has now begun to recover and is well-placed to capitalise on the home improvement trends seen during lockdown, with like-for-like sales up more than 25% year on year since mid-May.

According to Garnier, however, the pandemic merely accelerated elements of his new plans, including moving the ecommerce capabilities of stores to the top of the priority list. 

“While Covid-19 shifted our immediate priorities, it was essential that we put in place a new strategic plan to return Kingfisher to growth over the long term. We have learnt a lot over the last few months and our new strategy has reinforced our rationale and accelerated the opportunity for change, pushing us to be even bolder,” he says.

Digital-first DIY

With many physical stores closed, an ecommerce shift has become evident in lockdown, which Kingfisher has made a key element of its strategy.

For the first time, Kingfisher brands have implemented store-based picking and fulfilment, as well as last-mile delivery from store, which Garnier hopes will bolster its ecommerce capabilities alongside its click-and-collect service. He believes having the store at the heart of online is the best way to prepare for a new age of retail.

The group has also expressed an interest in using marketplaces to drive ecommerce conversions. 

“Ecommerce is a high priority for us,” says Garnier. “I would say we are experts on home improvement so I think that, as a leader, we should consider every part of the market, and marketplaces is one of them.

“It’s very early days but it’s important to look at marketplaces as part of the customer proposition.”

Kingfisher’s plan also involves a mobile-led service proposition, offering features such as visualisation tools, installation services and consumer credit, but Shiret has reservations about the efficacy of this aspect of Garnier’s strategy.

“I’m unclear how Kingfisher’s online proposition will turn out,” he says.

“They’re looking to improve the front end through mobile telecommunications, which is fair enough – that’s how people buy things and it worked at Screwfix. 

“But it’s also clear that you don’t drive online sales through picking items in stores, you drive it through marketing online, and I don’t get any sense that they’re intending to do that.”

New proposition

While stores are at the heart of the new Kingfisher strategy, Garnier recognises the need to change up its store portfolio.

Interestingly, he is adamant that the GoodHome concept that was trialled last year is “not a priority” and is “not a relevant banner for Kingfisher”, but that the group will instead roll out other forms of smaller concept or innovative stores. 

He gives the example of “B&Q Express”, citing the power of the B&Q brand in the UK, which he aims to build on instead.

“In my view, having a lot of stores is very important to stay close to customers and their catchment area. This probably means that we should have more compact stores – and we will review the size of our stores – but it’s important to have this large number to stay at the centre of the ecommerce proposition.”

To do this, Garnier says the group will explore opening new small stores, before reviewing big-box stores and potentially installing shop-in-shop concepts based on local geographies.

The new strategy also aims to grow Kingfisher’s range of own exclusive brands (OEBs), which grew under Laurys’ unified approach. 

The amount of own-brand and third-party unified products, which are sold under multiple or all Kingfisher banners, stands at 63% across the group’s portfolio – a figure Garnier does not wish to increase. His aim is to create diversity across the group through each banner’s OEBs and play to each brands’ differences as their strengths.

Garnier uses the examples of paint and lawnmowers to illustrate these differences. In France, consumers repaint their houses every eight years and have bigger gardens that require petrol lawnmowers, whereas UK consumers repaint every two and a half years in very different colour choices and use electric mowers for smaller gardens. 

Shiret agrees that “there’s always been an issue with Kingfisher that it’s very difficult to make the French and the English do the same”.

A move away from Laury’s assertion that “a screwdriver is just a screwdriver in the UK or Romania” therefore seems sensible; while some products can be similar, changing and unifying the ranges simply made them lose any impact, according to Shiret.

Pastures new or déjà vu?

In theory, it seems the Powered by Kingfisher plan is doing all the right things and ridding the group of the burdens of the One Kingfisher misstep. But Shiret remains sceptical about how well the plan will pan out, especially given the group’s history of failing major strategic reviews.

“I have an overwhelming sense of déjà vu,” says Shiret. “I think things had to change; he’s clearly doing something different, but is batting behind a decent set of sales figures due to one-time conditions. And is he saying anything that makes me think this business will be any more attractive than it was two years ago to the consumer or investors? I don’t think it is.

“The problem with strategic changes in retail is they take a long time to take hold and you find out how things don’t work as you go along.”

When asked why he thought this strategy was “finally” the one that would work, Garnier was adamant that “when you start with customer needs you cannot be wrong”.

Garnier’s plan and his new executive team have positioned themselves well as Kingfisher’s saviours, making bold moves to right the wrongs of his predecessor’s strategy. The City will now be watching to see if customers come to see what he builds.